Beiersdorf Surges After Pledging Higher Profitability This Year

By Julie Cruz -
Mar 5, 2013

Beiersdorf AG (BEI), the maker of Nivea
skin cream, surged the most since November in Frankfurt trading
as the company pledged higher profitability this year.

Earnings before interest and tax as a percentage of sales
will improve this year as revenue increases faster than the
market as a whole, the Hamburg-based company said in a statement
today. The stock surged as much as 5.1 percent to 70.19 euros,
the biggest intraday move since Nov. 2.

Chief Executive Officer Stefan Heidenreich, who joined the
company at the start of last year, said the company will focus
on China, Brazil and Russia as it introduces new products to
help keep revenue growing as European customers rein in spending
amid the region’s debt crisis. Sales from emerging markets now
account for almost 50 percent of total revenue.

“We expect Beiersdorf to report best-in class organic Ebit
growth over the next few years of 13 percent” versus 7 percent
for its European industry peers, Guillaume Delmas, an analyst at
Nomura Holdings Inc., wrote in a report today.

Adjusted Ebit rose 14 percent to 735 million euros ($957.8
million) in 2012, the company said, less than the 748.2 million-
euro average estimate of 11 analysts surveyed by Bloomberg.
Profitability was pulled down because of expenses related to the
relaunch of its Chinese haircare-product line, the company said.

’Blue Agenda’

Under Heidenreich, Beiersdorf is focusing on large
innovations and core products to drive growth as part of his
“Blue Agenda,” dubbed for the company’s trademark Nivea
packaging. Heidenreich last year dropped singer Rihanna in
advertising as he vowed to return the brand to its roots, which
include values such as trust and care.

The company will need between three and five years to
deliver sustained profitability, it said today. It will also
take as long to be in the “top tier” of the cosmetics sector.

The stock “offers a lot of upside potential given the
expected margin improvement, which will be the result of the
company’s Blue Agenda program,” Christian Weiz, an analyst at
Baader Bank AG (BWB), wrote in a report.

The operating margin at the consumer unit, which accounts
for more than four-fifths of sales, widened to 12 percent of
revenue in 2012 from 11.4 percent a year earlier, Beiersdorf
said. That was below Natixis’s estimate of 12.7 percent and DZ
Bank’s 12.4 percent projection. The margin would have been at
least 0.3 percentage point higher without the Chinese relaunch,
the company said.

The company also said today that Heidenreich’s fixed basic
remuneration was 1 million euros in 2012. That compares with
435,000 euros for former CEO Thomas Quaas in 2011. The CEO’s
total remuneration, which also includes bonus payments and non-
cash benefits such as the provision of company cars and the
payment of insurance contributions, amounted to 2.6 million
euros, Beiersdorf’s annual report shows. That compares with 1.44
million euros for Quaas in 2011.

Beiersdorf will maintain the dividend at 70 euro cents a
share, lower than a Bloomberg estimate of 80 cents. Full-year
revenue rose 7.2 percent to a record 6.04 billion euros, the
fastest growth since 2008, Beiersdorf said Jan. 24.